Real Industry, Inc. is a Delaware holding company that operates through subsidiaries.
Our business focus is supporting the performance of Real Alloy, a global leader
in aluminum recycling and our single largest operating business today, and to
make acquisitions of additional operating companies. We seek to acquire meaningful
ownership stakes in businesses with talented and experienced management teams,
strong customer relationships, and sustainable competitive advantages. We regularly
consider acquisitions of businesses that operate in undervalued industries,
as well as businesses that we believe are in transition or are otherwise misunderstood
by the marketplace. Post-acquisition, we expect to operate our businesses as
autonomous subsidiaries, as we do with Real Alloy. We anticipate that we will
continue to use our securities to pursue value-enhancing acquisitions and leverage
our considerable tax assets, as well as support the needs of our existing operating
segments, as necessary.
A key element to our business strategy is utilizing our considerable U.S. NOLs
by becoming a significantly profitable enterprise. Our NOLs were predominantly
generated by the legacy businesses of Fremont General Corporation (“Fremont”),
and as of December 31, 2015, we have U.S. NOLs of approximately $871.8 million,
which begin to expire if not used before our 2027 tax year. The ultimate realization
of our deferred tax assets, including our U.S. NOLs, depends on our ability
to generate future U.S. taxable income through the implementation of our business
plan.
Our business strategy is to take meaningful ownership positions in operating
companies that leverage the strengths of our platform, including our status
as a public company, our sizable tax assets, and the experience of our executive
management team. We seek to acquire companies with sustainable competitive advantages.
In considering acquisition opportunities, we seek businesses with management
teams that have shown success through business cycles, and have defensible market
positions. We regularly consider acquisitions in what we view as undervalued
industries, as well as businesses with values we believe to be misunderstood
by the marketplace. In all cases we seek opportunities that will be accretive
to our earnings.
We believe the Real Alloy Acquisition is consistent with this strategy. For
more information on the business operations of Real Alloy, please refer to “Our
Segments—RANA and RAEU” in this Item 1. Given our present size and
operations, the Real Alloy Acquisition represents a transformative transaction
for the Company. During 2015, our management team worked closely with the Real
Alloy management team to integrate and incorporate the Real Alloy Business into
the Company, even as a largely stand-alone business unit, and certain members
of our management will continue to focus on this transition until it is complete.
Further, we are working closely with Real Alloy management to accomplish the
business objectives and operating strategies of Real Alloy.
Beyond the Real Alloy Acquisition, we expect to continue to evaluate acquisition
opportunities as permitted by the terms of the Financings, and these may or
may not have a strategic relationship with Real Alloy. Potential transactions
are typically identified by our chief executive officer (“CEO”),
but may be sourced by members of the management team, Board, and others connected
with the Company. The bulge bracket investment banks on Wall Street, as well
as regional firms, and other organizations around the country, routinely approach
Real Industry with acquisition opportunities. Our CEO and management screen
such ideas and determine whether to engage in a process. During the second half
of 2015, after the Real Alloy Acquisition was closed and the integration efforts
were well underway, we recommenced our acquisition efforts, reviewed more than
a dozen potential acquisitions, and devoted significant management resources
to four such opportunities.
Similar to the Real Alloy Acquisition, we expect that most, if not all of our
future acquisitions would be separately financed in the credit markets and we
anticipate structuring any such financings to minimize the impact on our other
businesses. We structured the Financings for the Real Alloy Acquisition, including
our stapled Rights Offering, with a view to minimizing ownership shift in our
common stock and allowing our existing stockholders the ability to avoid dilution
as we grow. At the holding company level, we may enter into financing arrangements,
issue securities in secondary offerings, rights offerings or private placements,
or provide other financial support under terms that would limit us from additional
acquisitions until such financing arrangements are repaid.
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